Calculating the money factor

Ask the Hackrs
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1

Hi, everyone.
TL;DR: How is the money factor calculated? When I do it manually, I get an outrageous number compared to the LH Calculator. Can someone tell me how it’s done?

Here’s the specifics. I’m investigating a lease deal in Washington State with a MF of 0.00118 and RV of 0.57% on a 2020 X3 M. The MSRP is $78295, and the negotiated price after discounts and lease incentives is $66715. There are fees that total $925 in acquisition and $1117 for bank and dealer fees (not sure of the split). I’m not planning to use any MSDs. The taxable incentives are $3750, and I will apply a $1000 OL rebate post-tax.

When I calculate with the LH Calculator, it looks very reasonable with a total monthly payment of $702.

However, when I run the numbers manually through the Edmunds calculation process, I get a total of $857, mainly because it’s asking me to add the discounted price and the residual value ($112460.15) and then apply the MF. That’s $132.71/month, and it’s making the lease very expensive ($857.33)

Can anyone tell me if my manual calculation is way off base? It seems like it is. Thanks.

Here’s the numbers I’ve calculated:

  1. Sticker price (MSRP) of the car $78295
  2. Times the residual value percentage x 0.57
  3. Equals the residual value = 44628.15
  4. Negotiated selling price of car $66715
  5. Add in fees + $1,117
  6. Add lines 4 and 5 to get gross capitalized cost = $67832
  7. Subtract your down payment and rebates - $0
  8. This is your adjusted capitalized cost = $67832
  9. Subtract the residual value from adjusted capitalized cost. This is your depreciation amount.
    = $23204
  10. Divide the depreciation amount by the number of months in your lease. This will be your base payment.
    $6,890/36 = $644.56
  11. Add the adjusted capitalized cost and the residual value. Take the sum and multiply it by money factor. This is your monthly rent charge. ($112460.15)
    = $132.71
  12. Add the rent charge to your base payment to get your pretax lease payment
    = $777.27
  13. Multiply your tax rate by the pretax lease payment to get the total lease payment
    $232.78 x 1.1025 = $857.33
2

Aren’t you double-counting the incentives? They’re already in the discount, then you added them in the incentive field too.

3

Yes, his LH calculator is counting the incentives twice. His manual calculation doesn’t, but it also isn’t taxing the incentives correctly.

4

You also need to remember this is with just 1st payment DAS.

The LHC is going to give you a different payment with a different DAS.

5

Ah, I see. Okay, here is the updated LH calculator that isn’t double-counting the incentives.

Now the monthly post-tax cost is $822. That makes more sense.

6

The money factor of 132/month is still a killer. If I do 7 MSDs, it brings the deal down to $779 post tax. Drive off would be $3366 plus $5600 in MSD cost, so $9k up front. LH score of 8.8 years, so it’s a good deal, but not a tremendous deal.

7

Do MSDs, the return will be worth it.

8

A post was split to a new topic: Rdx mf/rv/incentives